Obama's First 100 Days: Busy? Just Wait

A BW commentary: The new Administration seems cool-headed as it faces enormous problems. But the bailouts and "stress tests" have been slow and messy

Uneasy lies the head that wears a crown as gross domestic product contracteth and unemployment runneth over.

With all due respect to Bill Shakespeare, that's probably a solid approximation of what keeps Barack Obama up at night 100 days into his historic Presidency.

Just think about the breadth of the mandate that landed the nation's first African American President in office amid its worst economic downturn since the end of Prohibition. Restore our reputation abroad. Get the banks lending and the subprime feeling sublime again. Clean up Baghdad, Bora Bora, and while you're at it, Buick. And now for good measure, save us from this swine flu, Mr. President.

Meanwhile, it's a safe bet that all the guy wants to do is resume his rock-star-like world tour, complete with fawning affection from the European street, ESPN anchors, and even the rarely seen softer side of Venezuelan strongman Hugo Chávez. There was that first-ever Passover Seder in the White House. Obama's part-Farsi Persian New Year message to Iranians. His thaw-inducing overtures to Havana, complete with an easing of travel and remittance restrictions for Cuban Americans. Michelle Obama got rushed by adoring students at a London all-girls school, the throngs hyperventilating like so many fans watching the Beatles on The Ed Sullivan Show. Barack Obama could well be known as the Great Normalizer…if he didn't have this Great Recession to keep him so busy.

A Cool-Headed Multitasker?

Thus the duality of the Administration's first hundred days: global rock star reconciliation tour versus the economic crisis nagging Obama back to Washington. The hope is that the two agendas dovetail, particularly as Obama enjoys a gangbusters approval rating, near-carte blanche fiscal power, and hesitant signs that at least the worst of the downturn has already passed.

Recall that the tipping point of last year's Presidential election was Obama's cool-headed response to September's daisy chain of financial calamities. He has since parlayed that perceived mojo into a near-unprecedented economic mandate. In the course of a little more than three months, Barack Obama has managed to pass a $787 billion economic recovery plan and a $275 billion housing program to stanch millions of foreclosures. He has thrown Detroit a solvency lifeline on the condition that U.S. automakers find cost-cutting and mpg religion—like, now. He deployed the remaining $350 billion chunk of TARP funding for paralyzed banks and followed it up with (at least in theory) a "stress test" of major institution and a joint public-private partnership to scrub banks' balance sheets.

Thing is, critics will not exactly characterize that response as hitting the ground running. It all started with Treasury Secretary Timothy Geithner's rocky debut, which spanned an embarrassing Senate confirmation, a less-than-resounding rollout of his Financial Stability Plan, and then widespread condemnation over the Administration's handling of bonuses doled out at AIG (AIG), now a ward of the state.

Still Pricing Those Toxic Assets

Merely hours after Obama drummed up his Treasury Secretary's long-awaited address, Geithner's Feb. 10 presentation was anticlimactically short on specifics. Vague talk of a stress test sent investors bolting from bank stocks, which had the effect of slashing the very equity capitalizations the government was loath to diminish.

Moreover, little clarity was offered on the controversial sticking point on which the previous Administration had punted in its lame-duck interregnum: how exactly Treasury proposed to price the toxic assets that were further poisoning crippled banks. After all, pricing them too low would further injure the banks; pricing them not low enough would keep investors from buying into them. Mr. Geithner only went so far as to reveal that a "range of different structures" was being considered.

Newly confused, the market sold off, with the Dow Jones industrial average hitting a 12-year low by early March. "On the one hand, the Administration excoriates banks for not loaning out more of that TARP money," says Chester Spatt, professor of finance at Carnegie Mellon University and former chief economist at the Securities & Exchange Commission. "But they took the money in distress, and to shore up their capital base after years of making too many loans. Which way do you want them to go?"

The Dow Still Lags Election Day

Spatt is also unimpressed by the Administration's slow-motion, leaky rollout of its stress-test regime. "Solvency regulators are supposed to already be doing this, but below the radar and behind the scenes," he says. "Think about the implications of telling financial institutions that they will face heightened stress tests. Do you then really expect them to increase lending? The way this has been handled is not very good."

While the stock market did pull off a furious rally from mid-March, it is still well below where it was the day after the election; the Dow is at 8017, compared with 9139 on Nov. 5. It fell to as low as 6547 in March.

Not that this is the only fire, economic or otherwise, that Obama & Co. will have to put out. Chrysler may well die, General Motors (GM) will have a hell of a war with its creditors, municipalities are terrified of going broke, the Federal Reserve may run out of firepower, and nasty inflation could be in the offing. Meanwhile, Pakistan and Mexico spell trouble, U.S. unemployment might pierce 10%, and Israel and Iran could duke it out, Wrestlemania style, sending crude oil soaring anew.

A hundred days is nothing. Stay tuned to the next 1,300-plus days of the Obama Presidency.